Saks Zero-Tolerance Policy

1. In my opinion, Saks’ zero-tolerance policy for employee theft was reasonable and is an effective way for internal control. Forging signature and theft are both criminal offence. Hence, even the loss Saks suffered was relatively trivial, Fierro should be punished harshly for his illegal actions. Management actions and attitudes can show their employees and other stakeholders Saks’ serious attitude against employee theft can maintain strict code of conduct among its employees. The fact that Saks fired Fierro, despite his high performance can demonstrate Saks’ determination to prevent employee theft. They can also foster a sound control environment that cultivates and advocates an honest culture of integrity and ethical values.

The policy may not be cost effective in the short-term as sales may be lost due to Fierro’s termination, as Fierro was a high-performing salesman. However, in the long-run, Saks’ policy can prevent future losses from employee theft and attract honest top talents. The long-term cost savings may outweigh the short-term loss of profits.

2. Internal control is defined as the process designed, implemented and maintained by management and other auditee personnel to provide reasonable assurance about the reliability of financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations. Saks’ anti-harassment policies and the related complaint procedure did not meet this definition and hence did not qualify as internal control. Although we can argue that such policies and procedures boosts communication between the management and the employees, thus encourages whistle-blowing, their policies and procedures are implemented merely to provide a non-hostile working environment for employees in accordance with the law (e.g. Civil Rights Act and New York Human Rights Law). They are also in place to boost employees’ job satisfaction. However, such policies and procedures